Market Solid As Fed Decision Looms

AP Business Writer

LONDON (AP) - Stocks eked out some gains Tuesday as investors all round the world prepared for a run of economic developments, particularly out of the U.S., that may determine how financial markets perform through the rest of the summer.

Though the U.S. Federal Reserve is not expected to announce any policy changes at the conclusion of its two-day meeting on Wednesday, investors will be monitoring a raft of economic data this week that could well influence expectations of a change in its monetary policy.

Tuesday's U.S. figures were in line with expectations and did little to alter the fairly placid market mood. Case-Shiller's report into the housing market in May showed further strength while the Conference Board's assessment of consumer confidence dipped slightly during July from the previous month's five-and-a-half-year high.

In Europe, Britain's FTSE 100 was up 0.3 percent to 6,578, while Germany's DAX rose 0.2 percent to 8,276. The CAC-40 in France was 0.5 percent higher at 3,990.

In the U.S., the Dow Jones industrial average was up 0.2 percent at 15,559 while the broader S&P 500 index rose 0.3 percent to 1,690.

The buying was quite restrained given what lies ahead.

"There is clearly an element of caution in the markets though, which is unsurprising given some of the events still to come this week," said Craig Erlam, market analyst at Alpari.

The key question in the markets is when the Fed will start reducing its monetary stimulus as it has indicated. Many investors think it could come as soon as September though they doubt the Fed will signal that on Wednesday. The Fed is currently buying $85 billion in Treasury and mortgage bonds a month in a move that has kept long-term rates near record lows and supported economic recovery.

Over the rest of the week, investors will have the monthly manufacturing survey from the Institute for Supply Management to digest, the first estimate of second-quarter U.S. economic growth, as well as a run of payroll surveys, notably Friday's official nonfarm payrolls report for July.

The dollar is also fairly flat ahead of the data dump over the rest of the week. The euro was 0.2 percent lower at $1.3240 despite an earlier survey showing economic confidence in the 17-country eurozone up at a 15-month high. The European Commission's headline economic sentiment indicator rose to 92.5 in July from the previous month's 91.3 in another sign that the eurozone may be emerging from recession.

Meanwhile, the dollar rose 0.2 percent to 98.10 yen. On Monday, the dollar fell to a month-low of 97.61 yen and that weighed heavily on Japanese stocks - a stronger yen could make the country's exporters more expensive and hurt their fortunes.

The Nikkei 225 index recovered some of Monday's retreat, closing 1.5 percent higher at 13,869.82 despite a drop in industrial output for June. The Economy Ministry said manufacturing slipped 3.3 percent from the month before in June and was 4.8 percent lower than a year before.

While the data underscored the fragility of Japan's economic recovery, it also could provide further argument in favor of the aggressive steps taken by Prime Minister Shinzo Abe to rejuvenate the moribund economy.

Elsewhere in Asia, South Korea's Kospi advanced 0.9 percent to 1,917.05 while Hong Kong's Hang Seng added 0.5 percent to 21,953.96. Mainland Chinese shares were mixed.

Oil prices drifted lower, with the benchmark New York rate down 91 cents at $103.64 a barrel.

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